TY - JOUR
AU - Garicano,Luis
AU - LeLarge,Claire
AU - Reenen,John Van
TI - Firm Size Distortions and the Productivity Distribution: Evidence from France
JF - National Bureau of Economic Research Working Paper Series
VL - No. 18841
PY - 2013
Y2 - February 2013
DO - 10.3386/w18841
UR - http://www.nber.org/papers/w18841
L1 - http://www.nber.org/papers/w18841.pdf
N1 - Author contact info:
Luis Garicano
Departments of Management and Economics and
Centre for Economic Performance
London School of Economics
Houghton Street
London WC2A 2AE
United Kingdom
E-Mail: l.garicano@lse.ac.uk
Claire LeLarge
National Institute of Statistics
and Economic Studies
Direction des Études et
Synthèses Économiques
15 Boulevard Gabriel Peri
92244 Malakoff Cedex, France
E-Mail: claire.lelarge@gmail.com
John Van Reenen
Department of Economics
London School of Economics
Centre for Economic Performance
Houghton Street
London WC2A 2AE
UNITED KINGDOM
Tel: 00 44 207/955-6976
Fax: 00 44 207/955-6848
E-Mail: j.vanreenen@lse.ac.uk
AB - We show how size-contingent laws can be used to identify the equilibrium and welfare effects of labor regulation. Our framework incorporates such regulations into the Lucas (1978) model and applies this to France where many labor laws start to bind on firms with exactly 50 or more employees. Using data on the population of firms between 2002 and 2007 period, we structurally estimate the key parameters of our model to construct counterfactual size, productivity and welfare distributions. With flexible wages, the deadweight loss of the regulation is below 1% of GDP, but when wages are downwardly rigid welfare losses exceed 5%. We also show, regardless of wage flexibility, that the main losers from the regulation are workers (and to a lesser extent large firms) and the main winners are small firms.
ER -